IRS Verified Financial Installment Agreement

A verified financial installment agreement is just an installment agreement that requires financial disclosure in order to be approved. This is not the name of an official IRS installment agreement. Rather, it's a descriptor used when a taxpayer sets up a streamlined or non-streamlined installment agreement, and the IRS requires a collection information statement. The info on the statement helps the IRS verify your financial situation, and it reassures the IRS that you're making the largest payment possible. 

Who Needs to Set Up a Financially Verified Installment Agreement?

Generally, if you owe over $250,000 (formerly 100k) you will likely need to disclose details about your financial situation in order to obtain an installment agreement. The IRS wants to take a look at your finances to ensure that you are paying the most you can. Basically, when you're dealing with this level of debt, the IRS wants to ensure that you're not just delaying paying as a form of credit while you use your money for other purposes. That said, it's simply too labor-intensive to require collection information statements on lower levels of tax debt.

However, if you owe less than $250,000 and a revenue officer is working on your account, they may request a collection information statement. Similarly, if you have defaulted on installment agreements in the past, you may be required to submit a financial statement. 

What Is a Collection Information Statement?

A Collection Information Statement (CIS) includes information about your assets, income, liabilities, and expenses. If you are required to submit this statement, it is highly recommended that you use a licensed tax professional if you want to improve your chances of success with your application. Although the CIS is full of numbers, a lot of the information is subjective. 

For instance, let's say that you list an excavator on your CIS. The IRS may see this asset and demand that you sell it or take a loan against the equity. However, a skilled tax professional may be able to convince the IRS that you need the excavator for work, and its equity should not be considered when calculating your monthly payment plan amount. 

Types of Installment Agreements That Require Financial Verification

Here are the general requirements for an installment agreement requiring financial disclosure:

• Businesses that owe over $25,000 and individuals who owe over $250,000.
• Individuals who owe less than $250,000 but have a revenue officer assigned to their account. 
• Individuals who owe less than $250,000 and have defaulted on an installment agreement in the last few years.
• Individuals who owe an assessed balance between $25,000 and $50,000 and do not want to pay via direct debit or payroll deduction.

Additionally, you must meet the following criteria if you want to set up any type of payment plan, whether it's verified or not.

• Cannot be in bankruptcy.
• Have not had an Offer In Compromise accepted on the tax balance that you want to make payments on.
• Completed the previous six years of tax returns -- or completed the last five and filed an extension for the latest year.
• Compliant with IRS payments in the past.

Generally, the IRS requires you to pay all new tax balances when you have an existing payment plan. If you don't pay after the IRS issues a demand for payment, the agency can terminate your installment agreement -- in fact, this is the most common reason for termination. However, there are rare exceptions where new tax liabilities can be rolled into existing Installment Agreements

How To File A Verified Financial Installment Agreement

• Call 1-800-829-1040 to speak to the IRS.
• File Form 9465 (Installment Agreement Request) or provide the IRS this information over the phone.
• Print and complete IRS Form 433 (Collection Information Statement) if the IRS asks for it. Generally, individuals complete 433-F if they're in the automated system and Form 433-A if they are working with a revenue officer. Businesses should complete 433-B. 
• Send these forms and a copy of your tax return to the IRS. If you e-filed your return, just send Form 9465 and Form 433 to the IRS. The address varies based on where you live, so you may want to double-check the appropriate IRS address. 

Special Instructions for Form 433-F

Many individuals need to complete Form 433-F. Here is an overview of what to expect on that form. Note that this is very similar to the information requested on Forms 433-B and A. 

• Part A: Accounts and Lines of Credit. List all your financial accounts such as checking accounts, IRAs, 401ks, brokerage accounts, etc. You need to include at least 90 days' worth of statements for all of these accounts.
• Part B: Real Estate. Note your properties including your primary residence, vacation homes, and timeshares. Then, list your monthly payments, and write the equity of each property. Equity is the value of the property minus what you owe on it.
• Part C: Other Assets. This includes automobiles, boats, and life insurance policies. You also have to note monthly payments and equity.
• Part D: Credit Cards. List all credit cards, their balances, and your minimum monthly payments. This includes store cards.
• Section E: Business Information. Note any accounts receivables owed to your business and include information about whether or not your business accepts credit cards.
• Part F: Employment Information. Share details about your income and your spouse’s income. You need copies of your paystubs and contact details for your employers. You also need to note how often you get paid.
• Part G: Non-Wage Household Income. Detail other sources of income. This includes alimony, child support, self-employment income, rental income, and pension. It also includes unemployment income, social security payments, and interest and dividends.
• Part H: Living Expenses. Explain what you need to live on and fill in your dependents.  This section includes monthly expenses for rent, food, transportation, mortgages, student loan payments, medical bills, and more. You also need copies of bills for the last three months.

What If You Need to Change Your Agreement?

To make changes to a financially verified installment agreement, you may need to complete a new financial information statement. The IRS may require this if you reduce the monthly payment or need to add a new balance to your existing agreement. However, if you simply want to change the date of your withdrawal or update your bank account details, you can usually do that online.

An installment agreement is the most common way that people resolve their tax debts. However, it is not the right decision for everyone, and in fact, the Taxpayer Advocate Service (TAS) says that about 27% of people who set up installment agreements may have qualified for an offer in compromise or currently not collectible status. To ensure that you're making the right decisions for your finances, you may want to consult with a tax professional. They can look over your situation and provide you with customized guidance. Use TaxCure to find a licensed tax pro in your local area. 

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney within our network.